Kerosene hiked 25 paise; it's a plus for OMCs: Ex-ONGC chief

Kerosene price hike by 25 paise is a welcome step, said Former CMD ONGC RS Sharma."Though the change will be small, the price hike is a matter of raising investor and management sentiment," he added. In an exclusive interview to CNBC-TV18, Sharma said the hike was long over-due and will be positive for upstream and oil marketing companies (OMCs) like Oil and Natural Gas Corporation.Below is the verbatim transcript of RS Sharma's interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.Anuj: Things finally looking up for ONGC, do you think this kerosene price hike that we have seen has the time come now to go through the similar kind of phased hike that we had for diesel and liquefied petroleum gas (LPG) and you think politically we are ready right now to go through the same phase for kerosene which could be a big trigger?A: I would say better late than never. I have been quite vocal on this issue because if you want more stability in the industry, this price subsidy has to be done away in a phased manner and it has been done earlier when even the petrol prices used to get raised, when there used to be a lot of hue and cry for diesel prices.Now slowly and slowly with the awareness programme, the consumer has come to reconcile with that. I feel the same way though in small doses I have felt that this pricing subsidy for kerosene as well as this LPG should be reduced, though if you look at the government's point of view, no point for the government foresee these companies and only the public sector undertaking (PSU) companies to sell at concessional prices and then compensating them on cash basis, it is not a good governance. So I am happy at this development and it has been well taken, there has not been any strong opposition to that, I feel that is the way it should be going forward.Sonia: What does this price hike do for ONGC's realisation? I know it is a small hike, it is just 0.25 paise per litre but any indication of how much the realisations of ONGC could go up by?A: More of this issue -- look at the sentiments part of it. If there is a better stability coming in share price in ONGC because the uncertainty part that the company will be subjected to uncertain amount of cash subsidy to be given to the downstream companies that is getting reduced and that is raising the comfort level of investors to invest in the company. Now they are able to evaluate these fundamentals and accordingly take a decision unlike in the past when they didn’t know that despite company doing well, how the bottomline is going to reach.So that is the positive thing, I wouldn’t be able to give the precise number right now, it will be very small but still it is a matter of sentiments raising comfort level of investors raising comfort level of the managements as well. So it is a very welcome step.Anuj: Right now kerosene does not account for much for ONGC and Oil India's subsidy burden, the government takes lion's share but as they move forward and if crude prices remain at current levels, if we don’t have too much of increase in crude prices from hereon, has time come for all fuel products to be deregulated and companies like ONGC and Oil India getting the net realisation -- the gross realisation being equal to the net realisation, can we look at that scenario in next two-three years?A: Let me be very candid, looking at the current political environment and all, I don’t think that would be feasible for the government to do because they are the segments, which consume LPG, kerosene. It is not easy to hit them very hard but in slow and small doses it is being done, the way it was done for petrol and diesel. So it is a positive step, I don’t think it will be possible for the government to entirely do away with this subsidies but current levels they are manageable and that is why there is a better comfort level in the whole industry, upstream, downstream. So IOC, all time high, the profits coming up, so these are the things that the fundamentals of the companies are visible now.